March 5 (Bloomberg) -- India’s 10-year government bond
yields held near the lowest level in more than a week on
speculation easing tensions in Ukraine will spur demand for
riskier assets.

Russian President Vladimir Putin said yesterday he sees no
immediate need to invade Ukraine, spurring a rally in global
stocks and sending the Bloomberg USD Emerging Market Sovereign
Bond Index to a nine-month high. Russian troops remain in the
Ukraine’s Crimea region after Moscow ramped up its military
presence following the ouster of President Viktor Yanukovych.

The yield on the 8.83 percent sovereign notes due November
2023 was at 8.84 percent in Mumbai, little changed from
yesterday’s lowest since Feb. 21, according to the central
bank’s trading system. Yesterday’s seven basis points drop was
the steepest since Jan. 20.

“Stability has returned to rupee-denominated government
bonds,” DBS Bank Ltd. economists, including Singapore-based
Radhika Rao, wrote in a research note today. “With policy rates
forecast to stay flat through the end of this year, we believe
that the yields on two-year and 10-year government bonds are
likely to remain rangebound between 8.5 percent and 9 percent.”

Reserve Bank of India Governor Raghuram Rajan, who has
raised borrowing costs three times since taking office in
September, said on Feb. 23 that inflation remains the biggest
threat to the Indian economy and any further action will depend
on data. Wholesale prices climbed 5.05 percent in January from a
year earlier, the least since May, and the consumer-price index
jumped 8.79 percent, the smallest gain in two years.

India’s government may borrow as much as 60 percent of its
5.97-trillion rupee ($96.8 billion) estimate for the fiscal year
ending March 2015 in the first six months, said two Finance
Ministry officials with direct knowledge of the matter, asking
not to be identified as the information isn’t public. The
government sold 140 billion rupees of treasury bills as planned
at an auction today, the RBI said in a statement.

One-year interest-rate swaps, derivative contracts used to
guard against swings in funding costs, rose one basis point to
8.68 percent, data compiled by Bloomberg show.